36875 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized India Building Capacities for Public Private Partnerships June 2006 Energy and Infrastructure Unit and Finance and Private Sector Development Unit South Asia Region Contents EXECUTIVE SUMMARY......................................................................................................................... 5 Approaches elsewhere to developing capacities for PPPs ............................................................... 5 PPPs in India................................................................................................................................... 6 Developing and strengthening capacities for PPPs in India ............................................................. 7 1. INTRODUCTION .......................................................................................................................... 11 Scope of this report ............................................................................................................... 11 Outline of the rest of this report ............................................................................................ 12 2. DEVELOPING CAPACITIES FOR PPPs: INTERNATIONAL EXPERIENCES ...................................... 13 Public sector capacities needed for a robust PPP program ..................................................... 14 Policy frameworks ............................................................................................................ 14 Legal frameworks ............................................................................................................. 14 Human resources ............................................................................................................. 15 Procedures and guidelines ................................................................................................ 16 Organizations: the role of cross-sectoral PPP units ......................................................... 16 Purely public versus public-private crosssectoral units .................................................... 17 Possible conflicts of interest within crosssectoral units .................................................... 18 The roles of national and sub-national agencies .............................................................. 19 3. PPPs IN INDIA: ISLANDS OF PROGRESS ..................................................................................... 21 The role of PPPs so far ........................................................................................................... 22 Institutional frameworks for PPPs in India ............................................................................. 24 The development of policies and standardization of contracts ............................................... 26 Training and other information dissemination initiatives ........................................................ 26 Where are the gaps in India compared to elsewhere? ............................................................. 27 Expanding the use of PPPs to meet basic services needs ........................................................ 27 4. DEVELOPING AND STRENGTHENING CAPACITIES FOR PPPs IN INDIA .................................... 29 Strengthening oversight of the fiscal costs of PPPs ................................................................ 30 Policy frameworks .................................................................................................................. 30 Legislative frameworks for PPPs.............................................................................................. 31 Information dissemination ..................................................................................................... 31 The development of guidance material for PPPs...................................................................... 33 PPP units to provide a pool of expertise ................................................................................ 34 Project development funds ..................................................................................................... 35 Funding of PPPs ..................................................................................................................... 36 Recommendations: a role for the center in developing India’s PPP program .......................... 36 ANNEXES ........................................................................................................................................ 39 Awarded Projects by States & Central Agencies ........................................................................... 39 Awarded Projects by Sector .......................................................................................................... 46 Project Pipeline by States & Central Agencies ............................................................................... 52 Project Pipeline by Sector .............................................................................................................. 56 Abandoned Projects...................................................................................................................... 60 Institutional Framework : Selected States & Central Agencies ....................................................... 62 India: Building Capacities for Public Private Partnerships Acknowledgements This report has been prepared by Mark Dutz, Clive Harris, Inderbir Singh Dhingra (World Bank) and Chris Shugart (Consultant), at the request of Department of Economic Affairs (DEA), Ministry of Finance. The analysis of PPPs in India is supported by a short assignment by PwC involving a description of PPP projects undertaken in 12 states and 3 central agencies, together with supporting capacity building measures. The database was assembled by PwC in January 2005, with updates by the authors until March 2005. The Bank peer reviewers for the project were Alain Locussol, Mohammad Mustafa and Stephan van Klaudy. The report has benefited from feedback from the “Capacity Building Workshop for Public Private Partnerships” which was held in Delhi on February 7, 2005 in collaboration with DEA, and supported by the Bank’s Water and Sanitation Program. The report also has benefited from feedback at an internal presentation to senior Ministry of Finance officials held in Delhi on March 17, 2005. Disclaimer The policy note has been discussed with Government of India but does not necessarily bear their approval for all its contents, especially where the Bank has stated its judgments/ opinions/ policy recommendations. 4 Executive Summary Both central government and the states are aiming Approaches elsewhere to to use public private partnerships (PPPs) more developing capacities for PPPs intensively to help meet gaps in the provision of basic services. India has seen real progress over In shifting from more traditional methods of the last 10 years in attracting private investment service provision, governments need to adapt into the infrastructure sectors, first in both their skills and their processes to ensure telecommunications, and now in ports and roads, that PPP programs deliver what is expected of and in individual projects in other sectors. There is them. The cornerstone of this is ensuring that the potential for PPPs to contribute more and help PPPs that proceed are those which represent meet the infrastructure gap in India. But PPPs are priority projects and are best done through the not a panacea. They represent a claim on public PPP route rather than through traditional public resources that needs to be understood and assessed procurement. Governments embarking on PPP by the government, and are often complex and long- programs have often developed new policy, legal term transactions in which mistakes in design can and institutional frameworks to provide the be costly. required organizational and individual capacities. New agencies are sometimes created to bring in financial and contract design skills not present in The Department of Economic Affairs (DEA) asked the government, and existing processes, for the World Bank to provide recommendations on example in planning and budgeting, need to be how capacities for identifying, procuring and adapted. managing PPPs could be further developed in India. Of particular focus is the possible role of Although not all countries have developed specific the central government in developing these new PPP legislation, nearly all have felt it necessary capacities. We look at both organizational and to amend existing legislation, if only to clarify that individual capacities, the former including policy public entities have the needed powers to contract and legal frameworks, and institutions and out services under PPPs. Comprehensive cross- processes. cutting PPP legislation has been used more extensively in countries that operate under the civil For the purposes of this report, we concentrate code. Where used, it often covers aspects such as on projects where private investment has been specifying which sectors PPPs can operate in, how made, and where the government is either the tariffs for PPPs are set and adjusted, the role of purchaser of services under the project, or where different institutions in a PPP program, procurement it provides a financial contribution through direct of PPPs, and dispute resolution procedures. Even investment or through risk bearing. The main where